4 ms·
I'm not an economist but I think that comparative advantage is a different thing. Absolute advantage is when you are best/cheapest at producing something. Comp
by saberdancer 6y ago
I'm not an economist but I think that comparative advantage is a different thing.
Absolute advantage is when you are best/cheapest at producing something.
Comparative advantage is when you have the lowest opportunity cost to produce something. Others may be able to produce it cheaper but they have something more profitable to produce.
Example might be steel mills, USA probably can produce steel, but it is much more profitable to produce end products (machines, tools, cars). So USA could be the best at producing steel and machines, but it ends up producing machines giving China comparative advantage to produce steel (let's imagine they do not know how to produce machines in a cheap way).
It's quite a strange concept.
- s1artibartfast 6y agoyeah, I think that it a more nuanced and accurate description. It is about having the lowest opportunity costs. I guess an individual or country could have both an absolute and comparative advantage if you can only do one thing and do it well.